 Credit risk modeling strategies: the road to serfdom?Dirk‐Emma Baestaens Intelligent Systems in Accounting, Finance and Management, 1999, vol. 8, issue 4, 225-235 Abstract: This paper aims at presenting some practical issues in modeling default risk of a single commercial credit counterparty from the perspective of a large retail bank. We define default risk as the probability that a counterparty’s intrinsic credit quality deteriorates within a given time horizon such that contractual agreements cannot be honored. This work gives an insight into using scoring/rating models in a credit environment of a large European bank. Contrary to many banks, we did not define the segments in a first step with a view to developing the rating tools in a second step. Our approach has, to some extent, followed a different path. Iteratively, we both defined the borders for a particular segment and selected an appropriate rating tool. More particularly, customer segmentation has been carried out on the basis of various rating tools’ goodness‐of‐fit criteria. The topics cover customer segmentation using goodness‐of‐fit measures, data measurement levels and optimization algorithms, rating tool calibration to the central default tendency and communication to the end user. Copyright © 1999 John Wiley & Sons, Ltd. Date: 1999 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:isacfm:v:8:y:1999:i:4:p:225-235 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Intelligent Systems in Accounting, Finance and Management from John Wiley & Sons, Ltd. |
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